Dealpolitik: Exactly Who is Carl Icahn Blaming for His Defeat at Dell?

In throwing in the towel Mondayon his effort to defeat the buyout of Dell Inc., Carl Icahn showers quite a bit of blame on others for his inability to defeat the deal. The biggest scorn is reserved for the Dell board which Icahn compares to a dictator, claiming that after the board realized the vote was lost “they simply ignored the outcome.”

And he also says that Delaware Chancellor Leo Strine’s decision to allow the vote on the buyout to move forward without waiting for an annual meeting and to reset the record date helped defeat him as well.

The issues he raises are not insignificant. The board did change the voting requirement for the deal from a majority of outstanding shares to the easier standard of majority of shares that cast votes. In exchange, the board secured a price increase. When boards change the rules for a game in the middle of a fight, that can be troubling.

But the bottom line is that Icahn failed in that he was unable to convince the holders of a majority of the Dell shares (excluding shares controlled by Michael Dell) to vote against the buyout, even if under the prior voting standard the buyout would have fallen short of approval.

Even after the board made the voting mechanism easier for Mr. Dell and got a price bump from the buyout group, Icahn would still have won if he could have marshaled a majority of the shares voting at Thursday’s meeting against the improved deal. And Monday’s announcement that he didn’t think he could convince sufficient shareholders is a defeat for Mr. Icahn.

Nevertheless, Icahn deserves some credit. He did pressure the buyout group to increase its price after it had insisted it would not do so. And the Journal reports that Mr. Icahn stands to reap a $70 million profit on his shares. Plus, Icahn says he will exercise his statutory appraisal rights which will let him make his case to the Delaware court on why the shares are worth more than the price offered in the Dell/Silver Lake deal. If he follows through on that process he will get a price equal to what the court determines is fair value which could be more (or less) than the deal price.

Still, his biggest weakness was that he never made a competing buyout offer to reflect what he says is the higher value shareholders deserve for the company. Chancellor Strine told him he would have had a better chance in his court case if he had made such an offer. The Dell board even offered to pay up to $25 million of his fees to put together such a deal if he would agree not to run a proxy fight against the winner of a process.

Monday, Mr. Icahn said: “we of course are saddened at our losing the battle to control Dell.” Shareholders could be forgiven for thinking that the battle was over which of the buyout offer or Icahn’s recapitalization proposal provided more value to shareholders. After all, the director election was presented as in the context of trying to elect directors who would vote for the recapitalization.

Shareholders are apparently choosing to take the money and run rather than decide who gets to be king.